It took about seven years for e-mail to become the de-facto standard for business communication, but it will take much longer (another 15 years at least) for e-commerce to become as indispensable a standard.
The reason for this, says Tjaart Kruger, Business Connexion executive consultant, is that e-commerce requires total integration into the business, which is no mean feat. In fact, most local businesses have as yet not reached business system maturity, which is crucial if e-commerce is ever going to achieve "de-facto standard" status.
Adoption of the technology (Internet) by the marketplace is also a factor impeding the growth of online trading, says Kruger. As it stands, there are just over 3.5 million South Africans who have access to the Internet today out of a population of 48 million.
"For the e-commerce channel to grow, more people need to start using the technology otherwise the impact on commerce will be minimal" he adds.
Until such time that critical mass is gained in transactions, (local) companies will not be able to afford a second distribution model, which is essentially what trading online requires. "Some companies want to build that second logistics infrastructure but high costs and low volumes prevent them from doing so."
Some companies have created an e-commerce channel, but use their existing infrastructure to deliver from, resulting in higher prices to the consumer.
"An e-commerce model should be offering you a product more cheaply than it is in the real world store. However, the reality is that it seldom does as the logistics aspect of the e-commerce model has not been optimised as yet," comments Kruger.
In addition to the price conundrum, another stumbling block for e-tailers is that the Internet is not easy for everyone to grasp. The housewife has to be trained in using the technology first, which is often not a simple task. It is then no surprise that the adoption rate in the small FMCG market (Woolworths, Pick `n Pay, etc) is very low - around 3%.
"Although IT infrastructure is still relatively expensive with software often costing in excess of R1 million and recognised applications fetching an even higher price, it is cheaper to set up e-commerce sales capabilities today than it was a few years ago," says Kruger. Purchasing an e-commerce solution is the first level of investment a business would need to make.
Yet another factor impeding the success of online trading is the content issue. Where goods do not fall into the low cost consumable category, it becomes tricky representing the look and feel of the item online. "One needs a friendly catalogue for the online trade. However, as with most things, this too implies an additional investment in content," he says.
To be successful, the business also needs to be committed to delivery. This too implies further costs, secondary level investment, as systems will need to be in place to plan prompt delivery. The third level of investment is in logistics.
"Logistics have to be put in place to meet demands, which is not something that can be achieved overnight," he notes.
Payment mechanisms are also something of a constraint. "The banking system does not mitigate risk therefore traders have no assurance that an individual buying online is the person that is meant to be using the credit card, for instance. Banks are also sticky about big payments online. Merchants will often not accept online payment for items that are expensive," he comments.
"On a global scale, banks need to automate the fund transfer environment. They need to look at verification mechanisms to make efficient payments. Money is about trust, which is lacking in online trade thus ensuring that e-commerce is not as simple as it ought to be."
One saving grace for online shopping will be when mobile technologies such as cellphones, for instance, will be used to buy online. Technologies such as this will act as a catalyst for change but until then, e-commerce has a long way to go before it delivers value to the business as an alternative sales and distribution channel.
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